Today I checked our bank balance, updated our cash flow Excel sheet and had a financial meeting with Gill (my wife and the other Director of Carson Systems).

Always being pessimistic

One thing that I continually have to remind myself is that cash flow projections should always be pessimistic. There’s just no use in saying “Hot damn, we’re going to be filthy rich if we exceed our sales goals!”. In can be exciting, but it’s useless.

Here’s my tip for cashflow projections: Cut your sales by 1/2 and then a little bit more.

If you’re still comfortably in the black 3-4 months in the future, then you’re good to go. Note: This advice applies to small businesses. If your company is bigger, you’ll need to look much further into the future. Also, if your company is fairly new, you might need to check your cash flow monthly or weekly. (We did, in the beginning.)

Don’t forget the tax man

The easiest mistake to make, is to look at your bank balance and forget that a part of it belongs to the Tax Man. If you don’t account for this you could be out of business before you know what hit you.

Plan for inflation, bonuses and pay increases

When planning your 3-year cash flow projection, don’t forget that you need to give your employees pay rises and bonuses. You also need to account for 3% inflation.

Formula errors are hard to spot

It’s extremely important to double check your spreadsheet formulas. Then check them again. Go through each Sum and Total and quickly check it’s correct. A great way to do this is ask your accountant to have a quick check over the spreadsheet – they’re great at spotting these kind of things.

Share the love

If you have good cash flow planning tips, or example spreadsheets, feel free to share below.